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What is a Construction Industry
Adjudication? There are two categories of adjudication these are; (1). Contractual Adjudication; (2). Statutory Adjudication (1) Contractual Adjudication If you have a contract with adjudication clauses, for example JCT standard forms usually have these, you the parties are bound to follow the rules and procedures as laid down in your contract, this is known as a contractual adjudication. Where any clauses or rules do not exist the statutory provisions as in (2) apply. (2) Statutory Adjudication If you have no clauses in your contract in respect of adjudication, you have the right to a statutory adjudication and you, the parties, are bound by the rules and procedures of the Housing Grants, Construction and Regeneration Act 1996 (Part II) and The Scheme for Construction Contracts (England and Wales) Regulations 1998 (commonly known as "the scheme"). There are however criteria that must be met to qualify for a Statutory Adjudication. For example, you need to be :- in a "construction contract" (section 104) carrying out "construction operations", (section 105) which do not involve a "residential occupier" (section 106) and the contract must be a "contract in writing" (section 107). Having met these criteria a right to adjudication arises if there is a "dispute" that can be referred to adjudication (section 108). As you might expect the definition of "construction contract", "construction operations", "residential occupier", "contract in writing" and "dispute" have now been well tested in enforcement hearings, thus there are now established legal precedents for these terms. It is therefore essential to ensure that you fall within these qualifications, otherwise the adjudication will not get past “first base”. Summary So to sum up, if you are involved in a construction contract the likelihood is you will be able to adjudicate, you will have either agreed an adjudication procedure contractually or you may qualify for adjudication under the terms of the HGCR Act 1996. If you have contractually agreed to adjudicate, but there a some terms missing, "the scheme" will apply as if it were your contract and it will fill in the gaps. I have not agreed to Adjudication in my contract, I have agreed to Arbitration only, am I exempt from or can I exclude an Adjudication? No, if you meet the criteria of the HGCR Act 1996 you have the right over all clauses in a contract to adjudication. The statute overrides any express or implied provisions to exclude adjudication. If you have been forced into an adjudication and the criteria of the HGCR Act 1996 are in place, YOU HAVE NO CHOICE you are in the adjudication whether you want it or not. If you choose to ignore it, this will be at your peril as the result is likely to be against you plus the costs. What does an adjudication cost? If I win will my costs be recoverable? Adjudication is a contractual process, thus it is possible to agree the procedure as to costs of an adjudication when agreeing the contract at the outset. Of course where nothing is agreed again the Statutory provisions apply. The costs typically are; (1). The Adjudicators fees and expenses; (2). The Party Representative(s) fees and expenses; (3). The Adjudicator Nominating Body appointment fee. (1) The Adjudicators fees and expenses The Adjudicator will normally at the outset advise the parties of his rates for charging, normally an hourly rate plus disbursements. At the end of the adjudication he will advise the parties of his total fee and who has to pay it. The apportionment of his fee is totally at his discretion, but it is usual for the loser to pay. There are no real yardsticks for the typical values of these fees as it depends on the complexity of the case, but currently one might expect hourly rates between £100 and £165 per hour plus VAT. In the Statutes, "the Scheme" states (part I, section 25) that : - "The adjudicator shall be entitled to the payment...of fees and expenses....The parties shall be jointly and severally liable for any sum which remains outstanding following the making of any determination on how payment shall be apportioned". Thus the winner could be held liable for the portion of fee due from the loser if the loser does not pay. It is important therefore as for any formal proceedings to ensure the person whom you are claiming from is solvent. Contractually, you can decide that the loser pays the Adjudicator, each side pay half or any proportion you like. There are onerous but legal clauses to catch out the unsuspecting contractor, which state that the whole of the costs of any adjudication are to be paid by the referring party in any event. This may render any adjudication claim pointless as the risk of costs against gain may be outweighed. This type of clause is likely to be outlawed in future revisions to legislation, but should be looked for when signing the contract. This undesirable type of clause will be identified if ARBICON ADR LTD preventative services are employed to review contracts before they are signed. (2) The Party Representative fees and expenses This is the cost of employing a professional specialist to act on your behalf such as ARBICON ADR LTD. Contractually, again the parties can decide between them who pays these costs. In the Statutes, "the Scheme" is silent on the issue of party costs, thus Adjudicators normally hold that unless there is an agreement between the parties on how the adjudicator should deal with party costs he is unable to deal with them. In such an instance no award will be made and the cost of the party representative is met by each party. Where no cost award can be made, ARBICON ADR LTD may take on your case on a performance fee basis, the risk of losing and the costs associated are thus minimised. We can thus agree a percentage of the recovered amount or saving with you, so that you will have a peace of mind knowing what the cost will be without any further risk. It is possible as has been experienced in the past that if Statutory interest is due to you at 8% over the base rate, such an award of interest can actually cover the cost of our fees. With such a reassurance on fees, ARBICON ADR LTD can add to this security with their excellent record of success. (3) The Adjudicator Nominating Body appointment fee If you do not have a named adjudicator in your contract and you cannot agree on the appointment of the adjudicator, the other option to obtaining an appointment is by asking an "Adjudicator Nominating Body" to appoint an adjudicator for you. There is a fee for doing this normally around £300 to £500 plus VAT. This cost is considered to be in the same category as a party cost (as in (2) above) and not an adjudicator cost, thus in the absence of an agreement to deal with it the Adjudicator will not make an award for its recovery. (unfairly in our view). I would like to proceed with an Adjudication, how do I start Adjudication? It is important that you speak to us first as there is essential preparation to execute first. Adjudication can be started "at any time" according to section 108 (2)(a) of the HGCR Act 1996, thus having established that you qualify for the adjudication process, you can start immediately. As indicated, however essential preparation is required first. We will guide you, by preparing your case by identifying its scope, conducting an investigation into the law and quantum, plus producing the narrative and evidence required to argue the matter to a successful conclusion. Our team works together on each case, the team comprises a combination of legal specialists and quantity surveyors that will each have an input to build the case for presentation. This combination is essential in successful adjudication, coupled with our methodical approach we are able to deliver the evidence that allows us to overcome the opposition or alternatively advise you against action. A director is assigned to each case. Once the subject matter of the claim is identified and valued, it is important to identify if the other party has been served with all the details of the claim. Any missing detail should be served prior to the issue of proceedings. This is important as it is necessary to establish that a "dispute" exists, this is essential for adjudication. If the claim is then subsequently denied or ignored after a reasonable deadline has expired, you have your "dispute" and you are ready to proceed to the starting line. The start is usually the service of a "Notice of Adjudication" on the other party. An essential document, which gives only brief details of the adjudication, naming the parties, the dispute and what it is the Adjudicator will be asked to decide, which is his "jurisdiction". The time starts here. Within seven days of this start, the Adjudicator is appointed and the case in detail is presented or "Referred" to him. On receipt of this detail, known as the "Referral Notice", the Adjudicator's timetable begins, he has 28 days to make his decision. During this period the Responding Party will make their case and there may be a meeting with the Adjudicator, plus often a flurry of written arguments and further submissions. If necessary this time may be extended by agreement to accommodate submissions. I do not want the appointed Adjudicator, I would like someone else to be appointed, how can I do this? If the Adjudicator has been validly appointed in accordance with the contract or HGCR Act 1996, you will not be able to remove the Adjudicator. However, as stated before, adjudication is a contractual process, thus it is possible to dispense with the Adjudicator with the other party by agreement, although this is highly unlikely. The only other option is to persuade the Adjudicator to resign. This might be on the basis that he has an interest in one of the parties and cannot deliver a balanced unbiased decision. More likely the resignation request however will come from a jurisdictional challenge. What is the Adjudicator's Jurisdiction and what is a Jurisdictional Challenge? The jurisdiction of the Adjudicator, is the power or right to judge within the limits of the scope of a dispute referred to the Adjudicator in the Notice of Adjudication. When adjudication starts you can often expect a jurisdictional challenge to be made. This will be a demand that the Adjudicator bring the matter to a close by resigning his position. Typical examples of where an Adjudicator may lack jurisdiction are; where the appointment is invalid due to non-compliance with the contract or the HGCR Act 1996; the contract itself may not comply with the HGCR Act 1996 thus adjudication may not apply; there is no dispute to decide (there are numerous reasons for this); a defective notice or incorrect service of documents. A successful jurisdictional challenge can be fatal and expensive. It is again imperative that we are at hand to either deal with such challenges or make them, depending on which side of the fence we are on. The determination of this type of scenario when it arises requires professional input from us. What evidence is there that Adjudication works? Adjudication definitely does work, take it from us, it is now the accepted established leader of all dispute resolution methods in the UK. There have now been many enforcement cases over the past eight plus years to test it, where parties have attempted to resist the process. Most have failed, in instances where parties have succeeded in resisting enforcement it has been mainly because of jurisdictional issues. What has arisen from all of these cases is a more powerful process with a set of legal rules. It is a process that requires careful management which ARBICON ADR LTD can guide you through smoothly. Bad debts and non-payments of monies are minimised and cash flow is maximised for the adjudication minded firm. Conclusion Adjudication is the most practical, least expensive and best way to solve disputes quickly. It has developed into a powerful means to achieve justice. However, professional help is essential conduct the process. Adjudication is nearly always a combination of law and quantity surveying. Adjudication in most cases can be described as a battle developed over a short period of one to two months involving intense and strategic arguments. We have identified in the foregoing that as well as having to prepare properly for adjudication, there is a need to appreciate and navigate the established procedures, case precedents and common complications associated with adjudication. It is thus essential that professional help from a firm specialising in adjudication combining legal specialists and quantity surveyors such as ARBICON ADR LTD be appointed. Examples of adjudication cases completed by the directors of ARBICON ADR LTD can be viewed in our section on ADR case studies. Our construction legal and surveying team will be pleased to assess the merits of your case, if we take on your case we may offer you an effective performance fee arrangement. We are always able to act immediately in the following ways : -
Contact us at advice@arbicon.co.uk or on the details given on our About Us page |
